HOSTESS BRANDS TO WIND DOWN COMPANY AFTER BCTGM UNION STRIKE CRIPPLES OPERATIONSFriday, November 16, 2012 at 7:00AM
Irving, TX – November 16, 2012 – Hostess Brands Inc. today announced that it is winding down operations and has filed a motion with the U.S. Bankruptcy Court seeking permission to close its business and sell its assets, including its iconic brands and facilities. Bakery operations have been suspended at all plants. Delivery of products will continue and Hostess Brands retail stores will remain open for several days in order to sell already-baked products.
The Board of Directors authorized the wind down of Hostess Brands to preserve and maximize the value of the estate after one of the Company’s largest unions, the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM), initiated a nationwide strike that crippled the Company’s ability to produce and deliver products at multiple facilities.
On Nov. 12, Hostess Brands permanently closed three plants as a result of the work stoppage. On Nov. 14, the Company announced it would be forced to liquidate if sufficient employees did not return to work to restore normal operations by 5 p.m., EST p.m., Nov. 15. The Company determined on the night of Nov. 15 that an insufficient number of employees had returned to work to enable the restoration of normal operations.
The BCTGM in September rejected a last, best and final offer from Hostess Brands designed to lower costs so that the Company could attract new financing and emerge from Chapter 11. Hostess Brands then received Court authority on Oct. 3 to unilaterally impose changes to the BCTGM’s collective bargaining agreements.
Hostess Brands is unprofitable under its current cost structure, much of which is determined by union wages and pension costs. The offer to the BCTGM included wage, benefit and work rule concessions but also gave Hostess Brands’ 12 unions a 25 percent ownership stake in the company, representation on its Board of Directors and $100 million in reorganized Hostess Brands’ debt.
“We deeply regret the necessity of today’s decision, but we do not have the financial resources to weather an extended nationwide strike,” said Gregory F. Rayburn, chief executive officer. “Hostess Brands will move promptly to lay off most of its 18,500-member workforce and focus on selling its assets to the highest bidders.”
In addition to dozens of baking and distribution facilities around the country, Hostess Brands will sell its popular brands, including Hostess®, Drakes® and Dolly Madison®, which make iconic cake products such as Twinkies®, CupCakes, Ding Dongs®, Ho Ho’s®, Sno Balls® and Donettes®. Bread brands to be sold include Wonder®, Nature’s Pride ®, Merita®, Home Pride®, Butternut®, and Beefsteak®, among others.
The wind down means the closure of 33 bakeries, 565 distribution centers, approximately 5,500 delivery routes and 570 bakery outlet stores throughout the United States.
The Company said its debtor-in-possession lenders have agreed to allow the Company to continue to have access to the $75 million financing facility put in place at the start of the bankruptcy cases to fund the sale and wind down process, subject to U.S. Bankruptcy Court approval.
The Company’s motion asks the Court for authority to continue to pay employees whose services are required during the wind-down period.
For employees whose jobs will be eliminated, additional information can be found at hostessbrands.info . The website also contains information for customers and vendors. Most employees who lose their jobs should be eligible for government-provided unemployment benefits.
The Teamsters Union, who had come to an agreement with Hostess, is also blaming BCTGM in a harsh statement released yesterday:
Unannounced Strike Has Put Thousands of Jobs in Jeopardy
(WASHINGTON) – Today, the Teamsters Union announced its recommendation to the Bakery, Confectionary, Tobacco and Grain Millers International Union (BCTGM) that a vote of its Hostess members by secret ballot should be held to determine if the workers want to continue their strike of the company and force it into liquidation.
On Wednesday, Nov. 14, Hostess Brands indicated that if it couldn’t resume normal operations by 5 p.m. EST on Thursday, Nov. 15 that it would have to begin the liquidation process. Teamster Hostess members and all Hostess employees should know this is not an empty threat or a negotiating tactic, but the certain outcome if members of the BCTGM continue to strike. This is based on conversations with our financial experts, who, because the Teamsters were involved in the legal process, had access to financial information about the company.
As stated previously, Teamster Hostess members have been frustrated by numerous missteps by a variety of Hostess management teams, but the union has tried to engage constructively to find a solution to preserve jobs. That comprehensive engagement has spanned 18 months.
The Teamsters chose to challenge the company’s path of a worker-only solution, engage constructively so other constituents would be sacrificing and require management changes and oversight so that the same missteps would not be repeated.
In fact, when Hostess attempted to throw out its collective bargaining agreement with the Teamsters in court, the Teamsters fought back and won, ensuring that Hostess could not unilaterally make changes to working conditions during the several months’ long legal process that recently ended.
Teamster Hostess members were allowed to decide their fate by voting on the final offer conducted by a secret mail ballot. More than two-thirds of Hostess Teamsters members voted with 53 percent voting to approve the final offer.
The BCTGM chose a different path, as is their prerogative, to not substantively look for a solution or engage in the process. BCTGM members were told there were better solutions than the final offer, although Judge Drain stated in his decision in bankruptcy court that no such solutions exist. Without complete information, BCTGM members voted by voice votes in union halls. The BCTGM reported that over 90 percent rejected the final offer and three of its units ratified the final offer.
On Friday, Nov. 9, the BCTGM began to strike at some Hostess production facilities without notice to the Teamsters despite assurances they would not proceed with job actions without contacting the Teamsters Union. This unannounced action put Teamster members in the difficult position of facing picket lines without knowing their right to honor such a line without being disciplined.
As is our longstanding tradition, Teamster members by and large are honoring Bakery Worker picket lines when encountered and complying with their contractual obligations when not encountering picket lines. The BCTGM leaders are putting Teamster members in a horrible position – asking them to support a strike that will put them out of a job when they haven’t even asked all their members to go on strike.
That strike is now on the verge of forcing the company to liquidate – it is difficult for Teamster members to believe that is what the BCTGM Hostess members ultimately wanted to accomplish when they went out on strike. We may never know unless the BCTGM members, based on the facts they know today, get to determine their fate in a secret ballot vote. Teamster members would understand that the will of the BCTGM Hostess membership was truly heard if that was the case.